If you possess a self-managed superannuation fund (SMSF) it is possible to invest in a range of properties, including residential, commercial and industrial.
Owners of SMSFs have traditionally looked to the residential sector to buy investment property as part of their superannuation funding.
Yet commercial property is booming as a possible option for SMSFs, and measures introduced in the April 2016 Federal Budget have also increased its appeal.
‘Business real property’ defined
According to the Australian Taxation Office (ATO), business real property (BRP) refers to land and buildings used wholly and exclusively in a business.
A SMSF can buy a commercial property and lease it back to SMSF members.
Business real property, including commercial, retail and industrial property, can therefore be a legitimate SMSF investment in the same way as residential property, as stated by Super Guide.
Unlike residential property, a SMSF can purchase BRP from fund members. Those fund members and their relatives are then eligible to use the asset at market rent and following the terms and conditions of a standard commercial lease.
A boom in commercial property for SMSF investors
As reported in the Financial Review, commercial and industrial property is becoming increasingly popular for SMSF investors – often a group of partners or practitioners who set up super funds to purchase a practice.
The key to successful commercial investment is in finding a stable, preferably long-term tenant.
2016 federal budget changes
This year’s budget has introduced changes which make investment in commercial property a relatively more attractive alternative to superannuation for high-end investors.
According to commercialrealestate.com.au, commercial investment looks set to benefit from restrictions on high income earners along with measures to boost employment growth in trade and industrial sectors.
Changes introduced in the April 2016 federal budget include:
Federal Treasurer Scott Morrison had previously denied that super caps would encourage high-earners to shift their investment into property.
But with top earners seeking to reduce their exposure to super – along with continued infrastructure spending as part of the government’s ‘jobs and growth’ campaign – it seems likely that commercial and industrial property will become a more attractive option.
So commercial property investment is really coming into its own. Which means if you’re looking to buy investment property in the commercial or industrial sector, there has never been a better time. Please note: This is general information only and readers should consult their financial planners or accountants before deciding on superannuation products.